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HUL joins Rs 4 trillion market cap league, stock hits new high

SI Reporter/Mumbai 05 Dec 18 | 04:11 PM

Hindustan Unilever (HUL) entered India's elite club of Rs 4-trillion market capitalization (market-cap), as its share price hit a new high of Rs 1,855 on the National Stock Exchange (NSE) on Wednesday.

HUL closed 2.2% higher at Rs 1,848.10 with the market-cap of Rs 4 trillion. The company stood at number four position in the overall market-cap ranking. Tata Consultancy Services (TCS) leads the chart, with Rs 7.53 trillion market-cap, followed by Reliance Industries (Rs 7.32 trillion) and HDFC Bank (Rs 5.71 trillion).

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HUL was up 6% in past three trading days, after the FMCG firm on Monday said it was merging GlaxoSmithKline (GSK) Consumer Healthcare with itself in a transaction worth Rs 317 billion, in the largest deal of the consumer goods space in the country.

Since October 12, 2018, post September quarter (Q2FY19) results, the stock of HUL has outperformed the market by surging 21%, gaining Rs 691 billion market-cap. On comparison, the Nifty 50 index was up 5.4% during the same period.

In its Q2FY19 results, the company has reported a growth of 11.1% at Rs 92,340 million as against Rs 83,090 million in the same quarter previous year. The volume growth for the quarter stood healthy at 10% with better growth in rural market on back of improved demand. All the key business segments of the company have reported early double digits growth in the quarter.

Anand Rathi Share and Stock Brokers has initiated the coverage on HUL with 12-month target price of Rs 2,250 per share.

“With HUL being largest FMCG Company with one of the largest footprint in terms of products and distribution network and its strategy to target volume growth primarily should drive health growth in medium term. The company has also entered into health drinks segment with proposed amalgamation of GSK Consumer business which we believe is value neutral while earnings accretive for HUL at current ratio. The deal at completion could add tentatively around Rs 4 in HUL’s EPS on post dilution shares," the brokerage firm said in a note.

“Assuming that HUL will be able to 9% value growth in Horlicks (ask rate is 20% growth in Super premium and just 5% in base horlicks business), and successfully implementing the cost synergies (800-1000bps at EBITDA level), we estimate the merger to increase overall EPS for FY21 by 6.4%," analysts at Elara Capital said in a note. The stock was, however, trading above its 12-month target price of Rs 1,732 per share.

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